On this episode of The Unlearn Podcast, Chris Walker, the Founder and CEO of Refine Labs shares his Revenue R&D framework. He also talks about demand creation and capture strategies, and the flaws in the current mindset around generating revenue.
[3:43] Demand generation is broken and needs a better framework
[11:10] The flaw in how companies look at the compensation plans of the revenue function
[12:50] The problem with how companies have traditionally thought about attribution, scoring and
[16:17] Why does the idea of having one team lead the go-to-market function makes no sense?
[19:37] The difference between demand creation and demand capture
[22:50] Should the revenue teams operate like the product teams with continuous iterations
[28:17] The Revenue R&D framework
[36:22] The need to measure demand creation and demand capture differently
[43:18] The things to consider when adoption the Revenue R&D framework
“I find it absolutely fascinating that companies never challenge how we're going to be effective at driving revenue until things are going wrong.”
Lex Sisney, CEO at Organizational Physics
00:17
To thrive in an era of digital transformation. you have to go to market differently. Let's find out how. All right Chris tells us a little bit about yourself that we don't already know and then we'll introduce ourselves to you.
00:31
Everyone, I'm Chris Walker. I've been a marketing professor and labeled myself as a marketing professional over the past 10 years since I got out of college where I studied biomedical engineering.
But what I was doing was understanding business. I think I was spending a lot of time in operations and product development and marketing and now I've probably sold 30 or 35 million dollars worth of deals in my career.
And so I've been working across the whole business and now I think I have a really interesting perspective when it comes back to how the marketing function is operated today, understanding it at I think one of the deepest levels of a professional out there and consulting with more than two companies over the past three years.
So seeing a lot of that stuff and then translating that to my view as a CEO of the size of a company that many of our customers are, you know, 100 to 500 employees and how you should structure your organization, how you should set your KPIs between your quote-unquote marketing and sales team whether just dividing it between marketing and sales.
The way that we've always done it is not even the right way to do it anymore. Whether we should challenge how we structure our organization to be successful. So I think my perspective both in the depths of marketing and that was my vantage point as a CEO is very unique.
01:43
Cool. Well, this podcast we're calling it Unlearn, and Kelly and I were talking about what we need to do to like growing in this. Like, let's say even more highly volatile times than we've all experienced before. And you know, as people grow older, which I am doing now, I'm thinking like hey there's a few things we gotta just unlearn and then create some mental space to learn some new concepts.
So I thought okay it would be a great way to like interview some guests or just not even an interview. But just have a quick conversation about like hey here's the quick concepts that we, I think that we should learn and then have a quick discussion about them and then keep this uber high quality and see if we can drive some change in people's lives, you know, so that was like my perspective on this podcast.
But Kelly, what do you think?
02:32
Yeah, I think following digital transformation, there's been a lot of adjustments to how businesses want to buy and the sort of direct marketing and sales playbooks have not caught up with that transformation. So we're sitting at this very interesting point and I think data and attribution have a lot to do with it as well.
If you don't already follow Chris Walker on LinkedIn, please do. He puts out a ton of good content on this.
03:00
You're living under a digital rock if you don't follow him, right?
03:05
I don't know though. So we come from partnerships and ecosystems and one of the things Asher and I talk about a lot is marketing and sales and partnerships, you get these echo chambers and people aren't going over to the other side.
I think that touches with what you were just saying, Chris about marketing and sales and do we have this structured properly? But for people who aren't familiar with your work, I would love it if you can give a sort of high-level overview of your position that demand generation is broken and dead and we need a better framework. If you could just kind of explain that point of view. I think that would be interesting.
03:43
Yeah, absolutely. There was one point that was mentioned that I just kind of want to cover here. I find it fascinating that companies never challenge how we're going to be effective at driving revenue until things are going wrong, like the time to figure out your podcast, you're having positive ROI on your paid social media spend, not cutting out all the garbage lead generation programs that don't drive revenue or wasting money for years at a time
And making some of those decisions in 2019 when it would be a total offensive move and you could have capitalized as many businesses did over that time by doing things differently, but don't question it until the economy tanks and you get forced to do it in 2022.
I think those are really interesting perspectives that business leaders should consider. People only look at the marketing function when things are going wrong, they don't treat it like an offensive function.
And so I think there's just when you get into this time where demand is falling for every category, where companies are having layoffs, where stocks are crashing across the tech and SaaS, where valuations are declining in these volatile times.
The way that you drive growth is through your product strategy and your business model, not by trying to figure out your revenue system. You're like you're fighting against the mark, the dynamics of the market demand is declining and you're trying to build it from the ground up and you're going to struggle to make it work.
So figuring those things out before the economy declines so that you can maintain your revenues that you can retain customers and things like that.
And when it happens, then you think about what our customers need differently today. How can we change our product quickly to adapt to this climate? How could we innovate our business model to set us up to be highly differentiated to capitalize right now and ask those questions in April of 2020 versus the funk? We don't, we don't know how to create demand. What are we gonna do?
I think as a CEO now when you think about the state of how demand gen has operated at companies, I just believe that the function is highly misunderstood. I believe that some people when they hear demand gen, think of running AB tests. I think that some people think it's outbound cold calling.
I think that some people think that all you do is just generate leads. But generally, I think the function is misunderstood. And when you look at it's not about the definition of the function, it's looking at how it's implemented in practice. I spent time working at more than 200 companies and I see how their quote-unquote demanding function gets implemented in practice and it's effectively a sales support function.
It is generating leads or other types of signals like MQAs to trigger their SDR team or perhaps they're a team to do outbound sales to people that didn't ask to talk to them. And so what you need in that function, what you need in a revenue holistic revenue system is you need high levels of autonomy. You need to be focused on revenue, not an intermediate metric to revenue to be effectively disoriented.
You need to be looking at things for now and in the next 12 months, you need to have a short time frame and you need to be customer-centric. And so those are the things that you need. And then when you look at how companies structure their demands, an organization that it's based on efficiency, how do we hit a cost per lead number or a cost per meeting number? Not how we find the right things to drive revenue in the future. It's an internal focus to support sales. It's not focused on customers.
The controls put in place by software-based attribution, high levels of lead, target KPIs and other constraints in the business make this not an autonomous function and prevent innovation.
And for all of these reasons how the company sets it up, like what you need out of that function versus how it's implemented in companies doesn't make any sense. And so what I've suggested to companies, many companies already do this is they take the operational support for sales functions, intent, and data, ABM, and SDR outbound lead generation and that just puts that under a Chief Revenue Officer under your sales team.
It's just operational, it's an efficiency function to support that sales function. But then you have this huge void in your revenue team and the way that you solve it is by creating a holistic view of all revenue programs, marketing, or demands.
Some people hope that revenue operations would be able to do this. But we have to explain why they're not able to and we need a function to look at the entire revenue system, and evaluate all the programs in a standardized way to prevent the marketing team from changing the SQL score to get more MQLs at the end of the quarter or by changing the attribution model to make SQL look better than what it's doing or all the other things that marketers do to game metrics to make their programs look better to executives and what we need in our entire business are we need to look at it all in the same way.
And we need to have an independent function to help to evaluate programs to decide which ones to kill, to experiment on new things, to decide what experiments we run, and decide how to reallocate investments to drive growth over the next 12 months.
And so that's why I believe that companies that are winning will move there, do what I just said move parts of their demands and function under sales and build a revenue R and D function, and then you have a revenue R And D team and you have a revenue team, not a marketing and sales team.
People want this to be one team but it's two separate teams that report to the CEO that serve very distinct different functions. So that's how I think companies will operate. That's what we've done in my business as of a couple of weeks ago and look forward to paving the way.
09:21
It's interesting because like I say the same thing in partnerships to you know and I'm like just focus on revenue, right? And then I get vilified for making these like you know statements that are offensive sometimes, right? But I agree 1,000%.
Now somebody who's done partnerships and there is no other way to pave the future outside of what I call a full stack revenue professional. And it's interesting because the product hat is right, you have people that are proficient in both like front end and back end product, you have engineers that are proficient in front and back and engineering, right? Why aren't there revenue professionals that are proficient in all these concepts? It's not that hard but it does require focus.
10:09
No, I was gonna say, I mean I think that was the idea behind the Chief Customer Officer right? You see, a Chief Customer Officer is supposed to oversee all of these revenue-driving departments and functions and make sure that they're looking at the whole picture and I think product-led growth is pushing companies more toward seeing the end-to-end journey.
But I'd like to know more Chris about how this would be structured in this newer model because you're essentially saying a lot of that optimization, that demand generation, which by the way, I just want to call out that demand generation is the highest paid marketer other than executives.
So companies see value in it even if they're misguided and poorly executing on it. And maybe part of the reason they're always looking for talent and trying to pay more is that they're not getting what they think they should be getting from it. But in this new model, you're saying they would have a closer affinity with what is now called sales.
11:10
Not necessarily. So first point, yeah, the demand gen person might be the highest paid of any marketer but they're still way less paid than a sales professional. And so I'll put that out there and how much the world has changed since the sales and marketing com bands have been reevaluated. It's been 20 years.
I also think that we should be re-evaluating whether a variable 50-50 or 70-30 type of comp plan for sales professionals is appropriate anymore. The reality is that in the year 2000, the sales professional did the marketing, the prospecting, the selling, and the account management. If they didn't go out and get business, they weren't going to hit their quota and they weren't gonna make money.
And the reality in companies today is that there are plenty of parts of the company that create demand for customers, and customer success. Word of mouth marketing, the CEO evangelizing the category. There are plenty of things that capture the demand, google SEO, your website, your partner network, the sales team directly, your SDR cadences.
And there are plenty of ways to convert demand, product-led growth, and sales assisted or enterprise sales motion. And so the reality is that the dynamics between how you drive revenue today are fundamentally different but we haven't adjusted comp plans to match that. I think it's a huge flaw in companies.
I also think that variable commission plans allow companies to over-plan and make irresponsible decisions. Then when they don't, they plan inappropriately and they don't have enough demand and 47% of their sales team hits quota.
The salespeople lose the money, the company recoups the money and the company just fires them. And I think it creates a lot of the wrong behaviors in venture funded companies and why we're seeing a lot of challenges in the sales department overall I think is based on outdated variable commission plans.
But anyway, to get a little bit further on this, I think that a really good way to highlight this is how companies have traditionally thought about how to think about attribution and scoring and reporting and ship like that where they just say it either came through marketing, sales or partner and then we'll just apply 100% credit to whatever captured the demand on a like tipping point or last touch attribution model.
And I think it's entirely flawed because the reality is that all of those departments and partners in addition to other areas of the company, like customer success, like your executive team, and things like that are actually all leading to those outcomes by creating demand, capturing demand and converting demand.
And so I'm suggesting that companies look at it a different way, which we're calling pipeline sources. So instead of being department focused, it's where it's based on the buyer, where did the buyer convert and how much can we infer about their intent based on where they converted into a sales conversation. You have major buckets, partner, your website, ABM, intent, data-driven, outbound, cold outbound events.
So you break it up into these six things that are agnostic to the department and then you say, what are the best ways where our customers are coming through? Where do we have the highest sales velocity? Where are we getting the most sales productivity? What are the things that are driving huge inefficiencies? Maybe we should just cut out the cold outbound and stop doing it. Look at how much worse the pipeline velocity is than our inbound in our ABM Motion.
I think the company is looking at it that way, strips out the emotion of the department, and creates the data to operate in a model but have the underlying insights to understand what, and how to drive the strategy forward. All bounds are great in theory, yeah, we want buyers to convert however we want but we need to be able to look at data and make decisions off on it. So I'm just providing a framework for people to use to make the decisions that isolate where are we capturing the demand which is a surrogate to buyer intent.
And then we have a whole other element which is how do we create the demand? And we have a whole another element of what is the best way to convert the demand.
So by breaking it out into I think these key functions and by looking at it as a pipeline source rather than what department sourced it, you're gonna create a lot more alignment in your business. I think the sales marketing credit fight that I, you know, had going on in 2017 that still exists in many companies is just so so dumb for lack of a better word. And so I think that this provides an entirely just different way to look at it.
That solves all the court challenges and all that I've done throughout the 3.5 years that I've run this company is, consulting with tons of smart, talented companies and executives, I see what the problems are in their business that they're communicating to me. I synthesize patterns of what I am hearing over and over. I can then use my brain to deduce why this is happening because of my vantage point. So now it's not only this that's wrong, but I can explain to you why it's wrong.
And then because I understand how the engine works and why things are going on, I can present very non-obvious new different solutions to solving these problems. So I think that by the logic and process of how I've gone about innovating at what my company does and trying to innovate for the overall revenue professional, that's how I do.
16:04
Makes sense and I know we weren't interested at the beginning of this because this is a conversation. So we'll introduce ourselves as we go through the convo, right? But then in my day job, I want to go to market for Demandbase, right?
And so we did this like a panel or maybe call it a huddle, you know, maybe that's the better way to say it right. With about 19 or so CMOS, right? And we just counted like the different ways people count, right, or the different ways people go to market if you want to call it that right.
And so it was like sales lead, marketing lead, customer lead, product lead, partner-led, community-led and those are like the six I would say. Yeah sorry. Yeah, six different ways to count this thing.
16:49
Successful companies do all of those.
16:51
I do anyway. So I said I said is there one dashboard that you can grab this from? And they were like no we don't have it.
Chris Walker
16:56
We crushed the community, we crushed marketing, crushed emails. We haven't found a partner yet. Like we are building a product lead, like good strong companies do all of these. I think that it doesn't, I just think it does a disservice to all of us as professionals to try and say that one is leading all the others.
The reality is that if you just had a partner and none of the other things over time, you're gonna be vulnerable. If you just throw product lead and you don't have an enterprise sales team and you don't have an ecosystem over time you're gonna be vulnerable to people. And so I think the idea of having one function lead as a go-to-market strategy makes no sense because you should be doing all of them.
17:34
Yeah, I think with you, maybe the lead word is too strong, just like the word hate is too strong in companies when they do, they're talking about attribution, right? But maybe driven is the right word. But I agree with you that the go to market has to be treated as a moat, right? Because companies treat the product as a moat.
17:55
I don't think the product is a moat.
17:57
I don't know, but sometimes people say that right? And I don't think that's true.
18:07
I think that ties back to your setting up things for competition. If you use product-led growth, you're sort of putting it as a frame that product is the most important function in the company.
I think that goes back to these multi-attribution models where you get these turf wars over opportunities, just like with marketing and sales.
But we see that a lot in partnerships, people are saying we drove 15% or 20% of the company's revenue and even framing it that way starts to lead to these turf wars where you're trying to make sure that your partner got more attachment than the marketing function did.
But I think there's another sort of theme in your work and you kind of just mentioned this that's interesting the difference between demand creation and demand capture.
I think that's worth diving into because in general, I would say companies are not as good a demand creation and it kind of requires a different mindset, maybe a different time frame and it certainly doesn't fit nicely into that lead obsessed model where you're asking yourself next month, how many leads have I got on my form? If that's your view, you're probably not doing a great job of creating demand. If you want to unpack that a little bit more.
19:26
Some person by the way listening to this podcast just lost a Ferrari, you know, because they're like, I can't even handle this anymore.
19:35
Mean like what does everyone think happens before someone goes to Google? They just one day have this brilliant idea and they're like, oh my gosh, I gotta go in there and search financial business software, that's what I'm gonna do today.
That is not how it works. There are ongoing triggers that can activate a buying process that companies don't execute because they don't measure effectively.
And so the way that I look at this and many people do and this is not unique. Many people look at it this way now instead of looking at it as a funnel, we look at it in two stages. The companies either in the market or they're not in the market there either showing intent to buy or they're not showing intent to buy.
And we need two different strategies for those two different people. The ones that are showing intent to buy have already in some if they're in there searching financial business software, they've most likely seen that pain point in their business.
They heard about it from a colleague or a friend, they saw, you know, a post about it from a CEO on LinkedIn. They listened to it on a podcast that isn't your company's podcast. But it sounded interesting.
So they're gonna go and check it out and something created the demand where they learn about it when they're not looking for it, which then drives them at some point as a trigger to say, okay, now I'm gonna go in the market and I'm gonna go explore whether this is right for me or not.
And it's very common for a company to go and then demand capture. They go to the market, they decide not to buy. They don't even engage with vendors, they go back out there like, oh it's gonna be $30,000 a month. Let's just go back now. They're back here. They're not in the market anymore.
Then, all of a sudden another trigger occurs, like their CMO leaves. Now they're back in the market, they're looking and then they just evaluate three vendors but make no decision.
They go back out of market, and they are not in the market six months later, but they don't hit their plan so now they're back in the market and they choose one of the three vendors that they already looked at.
And so this idea that you buy in a linear process and once you get to proposal you won't go backward. I think it's so outdated and so dumb. And to operate in that way you must have two distinct motions. You first must have a core motion for people that are showing intent.
They do those in a couple of core places. It's not complicated. They're gonna go and search within Google, they're gonna go to your website. If they already know about you, they're going to go to affiliates or other programs like that, they're gonna go into dark social and ask their peers and other people what they think about your company, they might eventually land on your website.
And if they're doing that stuff, your job is to figure out if you have an enterprise sales motion, how to get them into a sales conversation, and if you have a product led, how to get them into your product.
But then you have this whole bucket of the market which I estimate, people say 95% I think it's greater than 99% of most markets that are not in an active buying cycle right now. And they might have been six months ago and now they're not anymore.
And you need to have the motion to be constantly creating demand for your category in the market to your entire total addressable market or your super consumers, whatever you decide, super consumers, the top 8-10%.
And so you gotta have the motion to be actively creating demand by educating those people. Now, let's get into why companies don't do this. It seems so logical, right?
Like we should be marketing to people that don't want to buy, not asking them for a sales conversation because they don't want to buy right now. We should be doing marketing and sales in a different way to educate them. Which then pulls them into the things that are interesting about what we can do for them.
22:50
So right before you launch into that part because I feel like the media chunk of this podcast is coming. You called it Revenue R and D right? And it's phenomenal, right? Because there was another meet-up that we did with about 90 or so CMOs, by the way, where they started talking about, we need to treat this whole process like a product because product teams have this thing down where they just iterate like every two weeks and have like whatever their, their teams are comfortable with and it's not that like I know there's SCRUM where there is a full-blown framework where you can like to iterate every two weeks and stuff.
But if your team doesn't want to do it every two weeks, they just want to treat every three weeks, let them every three weeks, right? But it's the, getting the mindset into that mode where we're going to launch it, make it better relaunch and we're just always launching in a way, right? And so is that how you're thinking about revenue already or like how do I like, like internalize this?
24:01
So the way that you're communicating and suggesting, I think it's way too micro and we should be looking at this more in the macro. Sure sprints could be an effective tactic, but we need to zoom out and look at it at a higher level. There are a couple of key things that I wanna hit on here.
The first one is how companies justify their investments in product development. What do they do? They get customer insights, they decide how we're going to act on those insights, they put together a business case, they get it approved to go through and do it and they work through a development process about how to build it And they then when knowing that the first month they build it, they're gonna spend $80,000 on engineers and they're not going to generate any revenue.
And that's gonna happen for 12 months for big features. And they know that they're doing it because the ROI in the future will pay back the cost of the development, that's how you do product development now.
What happens when you do it for revenue? Programs day one, you decide to launch your podcast. Where is the ROI? This is in working dollars. It's being scrutinized against the results that we generate this month and it kills and destroys innovation.
100% companies can't innovate because of the way that they look at the ROI. If you did this differently and you use the revenue R and D framework where you go out and get customer insights. Damn.
What we're finding out is that all of our customers are finding out about how to do this type of technology from these three key people.
These three key people are speaking at conferences, they're talking on podcasts, they're doing things like that. Let's put together a monthly roundtable with these three people where we bring them on and we do a live event and it happens once a month. That becomes a podcast of video content, things like that and will and that will be the experiment.
And it's gonna cost us in the sponsorships and everything like that. It'll cost us $25,000 a month. So after six months, we've invested $150,000 and maybe in one month, there is 0 dollars in the pipeline. Month two, $20k in the pipeline. Month three, $30k attributed to the podcast. You know, month 4 $200k attributed to our LinkedIn promotion of that. You know month 5, $300k months 6, $400k.
So all of a sudden you've done six months of work, you've seen increasing results, you've spent $150k and you've generated a million dollars in the pipeline. Where if you use a standardized definition of the pipeline you'll know that you're gonna win at least 25% of that or $250,000.
And then all of a sudden you can say wow we just spent $150k and it's only been six months and we're already at a positive ROI.
So I think that people need to start changing and that's why it's split between a Revenue R and D team and a revenue team. So active programs are being run across all different departments of the organization and these experimentation things are also running.
26:58
Okay, so this is an incubation team, inside of the revenue team. Okay, this is super interesting because Kelly when we had our good friend Balls on the part of this webinar, he also talked about an incubation team within the partnerships team to work on new business models, which going back to the beginning of this podcast, Chris said like, hey one of the things where you're gonna, you're gonna win is just flipping the business model.
27:23
Yeah, I think one part of it is incubation, but I think other principles of this process are strictly important, which is creating a standardized measurement and attribution model that you use across your entire business by having one function Revenue R and D evaluate the effectiveness of all programs of the organization and in a holistic way and standardized way.
So this is not just like we're gonna go out and do arts and crafts and some experiments. It's really like this is the command center that drives our future go-to-market based on the strategy that our product strategy and CEO and product people have delivered to us.
28:03
Are we going to the Revenue R and D right now? Are you running the process on us? Is that what's happening?
Kelly Sarabyn
28:09
We’re not his target customer.
28:12
Not offended by and I'm just like, I just had a matrix moment, you know.
28:17
We have built our organization exactly as I'm telling people right now. We use a Revenue R and D framework. We've standardized measurement in our business as well as more than 50 B2B SaaS companies.
So we have a really good sense of like people call it pipeline across all the different things. They say stage two pipelines, what we're optimizing for, and then on their cold outbound they win that pipeline at 7% and in their partners, they win it at 60%.
On their website, they went in at 40% and in the model, everything is weighted the same. It makes no sense, the pipeline should be standardized based on a win rate metric that's aligned to revenue the way companies align it based on the stage of their sales process.
I think it's highly outdated and it flaws a lot of the analytics that come along with it that comes out of the tools, you know, revenue intelligence tools and things like that by not looking and accounting for that metric.
29:08
Okay. But this is a separate team though, right?
29:10
100%. Let me talk through this because this is confused. This is deep. So I believe that the overall function of marketing is not serving companies anymore and they should consider reevaluating it at the beginning.
It was just product strategy, product marketing, brand, customer insights, and strategic long-term work. And then over the past in the last 10 years it's become there's a lot of short term stuff lead gen or demand gen has come into marketing which is short range marketing ops and data and technology which is efficiency and you just have all of these, you have this bucket of stuff called marketing that it all has competing priorities between long range and short range, high controls or autonomous effectiveness versus efficiency and customer focus versus internal focus.
And it's just a big mess and I don't think that it's serving companies anymore to do it. In addition, the conflict between marketing and sales is undeniable and companies try and put band-aids on it by hiring a CRO to align the function or do other stuff like that.
And I believe that the real issue is that the marketing function should be divided into three core functions. You should have one function that's focused on long-range and doing what's right for the company in the long-range that includes product strategy, category, strategy, product marketing, customer insights, stuff like that.
I believe that the company should take the marketing ops and data out of that function and centralize it to a revenue operations function that is focused on internal efficiency and that they should and then should roll the demand gen function that right now is mostly sales support.
So take the things out of demand gen that our sales operational support, put that under sales and then you have this void in your revenue team that you deploy revenue R and D which is a holistic view of all our revenue programs using standardized measurement data to build a pipeline of innovation.
Both things that we're running right now and things that we're going to develop in the future, just because we're evaluating the programs in Revenue R and D Doesn't mean that we need to execute all of them.
And so if the CEO wants to do a podcast and the brand team wants to host events, that's awesome. And those investments will be scrutinized in a standardized way in a centralized function.
So I work with enough companies and companies have tried to have robots do a lot of these activities and the reality is that there's this massive competing priority of robots between being internally focused on efficiency and being focused on customers and being effective and it's just two opposites in the spectrum of the organization.
And so over time, efficiency will always prevail. How are we going to structure our attribution? How are we gonna measure the pipeline? How are we going to forecast and plan? How are we going to decide where to allocate investments? How are we gonna decide what programs to kill and which ones to allocate more money to? And that happens in a Revenue R and D function now.
32:04
So I want to dig in a little bit more on the attribution because I think to your point that is one of the biggest blockers that companies are afraid to change from their current attribution models and honestly either they don't know how to do it or they think it's not precise enough.
So in this newer model, you know, I think you can have those forms for customers right? Like where did you hear about us? You can also do these more detailed customer insights and interviews across the entire stage, right? Are there additional ways that you can attribute some of these demand-creation activities?
32:44
So first off, I just want to like sort of communicate a distinct difference here is what I'm saying is that most companies should effectively transform their demand gen function into a Revenue R and D function and structure the organization and the responsibilities in the KPIs to support that objective.
So what I'm communicating here is that I've worked in, I put myself in the category of demand gen from 2015 to 2022. And what I found is that the constraints that hold the demand gen community and professionals back are deeply rooted and are never gonna change.
And so when you think about what's going wrong in your organization, it's like they think that the only way to measure things is with software because they're only optimizing for demand capture and driving leads and there are these old outdated behaviors about how the demand gen function worked in 2016, that's still perpetuating companies right now.
33:41
But I'm saying someone wants to adopt your model right there like yes you're right, things are broken. That sounds good. I'm saying these are the ways that I was talking about, you know, asking the customer, how did you find us doing those detailed customer interviews? Are there additional ways that you can understand?
Where was the podcast? Was it the fact that you went to these five slack communities and you were a vocal presence there? What we often refer to as dark social, all these different ways that to your point aren't yet trackable by this very specific software and dashboards.
What do you advise your companies to do to get the clearest picture possible as to where they're excelling and creating demand?
34:29
A breakthrough on this one is deciding that we need to measure demand creation and demand capture differently. Right now companies just try and jam it into, we have a demand capture tool that tries and measures demand creation and demand capture with it, and naturally doesn't work. So you need to separate measurement mechanisms.
34:48
The way that people feel this by the way and I felt that several times right is there is a moment that happens when the entire company starts to become a marketer or CMO and they just still tell them marketing everything that they want to do.
And I think this solves that because if there isn't a Revenue R and D Function that's sitting outside of marketing, then when people get this feeling around, hey, you know now sales is telling me how to do marketing or product is telling me how to do marketing or the CFO just told me how to do marketing, right?
And you're like fantastic, you want to do this, go ahead, launch it, you're going to get scrutinized the same way that everybody else is, but we're just gonna put it in this bucket so that it gets done. So you feel like you were supported versus us just having to queue this up and just never getting to it because of the way we measure things. I think this is brilliant.
35:40
Just put self-reported attribution on your form that drives all your revenue through your website and put that into a Slack channel with the entire company and we do that in our company.
And it's very clear a lot of submissions in high ICP say “I love your podcast. I've been listening to your podcast for two years. I've listened to every episode, I see Chris on LinkedIn. I saw your CEO on Tiktok, you know this exact person referred us to business.”
We know all of these things that companies just decide not to measure and it drives your entire strategy forward. And so I think that right now with the available information it's like the easiest thing to do is put that field on your form and be able to understand in a free text environment, not a drop-down and ship like that to understand how people are discovering your company and what they tell you is they tell you what created the demand, very few people in there are saying, I found you in Google search.
They tell you what created the demand and then you have attribution software in place which is perfectly appropriate to measure what captured the demand and dictate pipeline sources and things like that. And so you have all the information that you need.
So I think just that would be a massive leap forward for most B2B organizations because you're gonna get a bunch of stuff that you didn't know was working or you thought was working but couldn't prove it and now you can prove it.
The next thing is to separate the idea of a program versus the activities that support the program. And so like my live events, I'm not scrutinizing my live events against revenue. My live events are a way to create the podcast which then drives revenue through the podcast and LinkedIn.
And so I'm not over here saying that wondering whether my event strategy is working or not because we drive seven million or more in the pipeline a quarter from our podcast and the event feeds into the podcast.
And then lastly, I think that if you did separate the functions this way and you did have a long-range effect and dysfunction called product and category strategy, you should be doing in-depth customer research, qualitative and quantitative at various market sizes to understand how to shape, dominate and educate your category.
And so those are, I think that using large-scale market research surveys as a way to understand people's buying preferences would be very eye-opening to companies. I did it in 2017. Most people still haven't done it today.
I did it in 2017 to change my career forever. What did people say? I don't want to talk to your sales team until I know the price. I do learn about these things initially through social media and podcasts and people that I trust before I talk to your sales team, I want to talk to someone that use your product before and when you just ask your customer what they want to accomplish and how they want to buy it dramatically would change how you, your company goes to market.
But most companies go to market, they sit in a boardroom and they say what's gonna be easiest for us with the resources that we have right now.
And they don't think about whether they need the 12-person outbound team to cold call people. They just try and say, okay since outbound is not working, let's make our 12 junior people that can't help an executive at our target customer and make them content creators instead of starting with a blank slate and just thinking critically about what buyers need today.
38:55
Playbook market fit is what I call that. What you're saying makes so much sense again when, when covid hit and it was part of this other bootstrap company, we shut down all marketing, which just had a podcast.
And then we looked, we created a sales funnel around the podcast and we had no idea what we were doing. But we just knew that people wanted to chat with us about our problems, but they wanted to chat with us, not in a discovery call, but in a live environment because it was fun and we would.
And it worked beautifully. It became one of the top podcasts in B2B after, you know, 200 episodes, which I guess you need that type of volume anyways. Right? So I mean I would say this works if you just go and look at it as you're calling it already but I would just call it, you look at your go-to-market as a product.
40:18
Yeah and then like just to highlight something and this is like an executive level. I think that most executives just fundamentally misunderstand how to create capture and convert demand today and still operate on old principles where salespeople did all three of them and so when they think about planning for next year and how they're going to get to their revenue goal, they just say how much revenue we need, let's do a reverse headcount model, how many reps do we need? How long are they gonna be on board?
And they don't understand that it's highly inefficient and ultra-expensive to have your sales rep creating demand today. It makes no sense. And so and then they don't and then because of the attribution skewing and measurement mindsets and things like that, they invest all their marketing dollars in capturing demand and they have no engine and no investment and no way to measure anything they do in creating demand and the entire system is super inefficient.
You got too many salespeople at the bottom waiting for demand. That hasn't been created yet and you just burn money. People miss quotas and things like that. This is a very basic systems engineering approach. We have a system, and the dynamics of the system are changing. We need to adjust the system to adapt to the changes and so just looking at them as three separate things and doing as I view it as basic process optimization and looking at where is the, where is the gap in our go-to-market.
And it's almost always the companies are overinvested in sales to convert demand and they don't effectively invest or measure how and go out to create demand and that's the issue.
41:52
I agree. I think the key here is market research and by now people like McKinsey have put this out right that people prefer to go and spend like 5% of their buyer journey with the vendor. But so many companies have just not caught up with that in terms of how they go to market.
Do you think the macroeconomic conditions are going to be good for this business model or do you think because of the time component, it's not going to help because people are going to be even more shortsighted?
Not for your business personally, but for like sort of spreading this throughout the market because we have this conversation in partnerships all the time. Because partnerships face a lot of the same problems.
There's a lot of partner influence that isn't necessarily captured in all organizations in a very similar way. And so some organizations have responded by saying just drive revenue by being a reseller or get out, we're going to cut the program now other programs are more mature and they already have influence being recognized and I think those are going to be able to continue and flourish.
But I was just curious if you think, you know the economy sort of becoming more challenging in general is going to make people less likely to sort of see the light on this and change how they're operating.
43:18
Think that if companies practice this mindset in April it probably would have been effective. I think that transitioning and adopting it now might be a little challenging but the reality is that the way that you adopt Revenue R and D is the first thing that you do are you standardize measurement across all your programs and you do a holistic analysis of how all of your different go to market programs are working based on how you measure stuff today, not how you're gonna measure it in the future.
And what would you find immediately when you did that? Because I've done this on more than 100 companies, I have seen inside of their Salesforce data, looking at how much they spend, getting their budgets from finance, looking at what's going on and you can immediately find 20 to 80% of the variable program spend on marketing and SDRs is wasted.
And so like companies want to say right now, the first thing, the first thing you should do is scrutinize your programs, not just say we're gonna cut marketing by 30%, scrutinize the whole go to market and decide what are the places that actually should be cut.
And when you do that, you're gonna find a couple of things. You're gonna say, here's one big bucket of the stuff. We know that we can measure it effectively and we know that it's not working based on that data, let's cut it. Then you're gonna have another bucket that you say we can measure it effectively and we know that it's working, great.
You're gonna have a third bucket that you say, we think that it's working but we can't measure it effectively. Now we have to go out and decide if can we close the gap on measurement to know whether this stuff is working or not, then you have three buckets to spend.
Then you take all the stuff that you waste that you were wasting that wasn't working and you apply that money to either get back to the company because times are tough but probably a smarter thing would be, how do we go and take this money and deploy it to the stuff that's working right now that we know is driving revenue, it would be a much better investment than keeping six more of your sales headcount on your 200 person sales team.
But companies just don't look at it that way. They just say let's cut market because it's the easiest.
You deploy all those funds, then you probably have some leftover 20%. I think at this point, most companies should give that back to the organization. If you want to be, if you want to be innovative, then I would put that toward experimentation and building out a true Revenue R and D function inside your organization, which is going to provide as significant of a competitive advantage, as having the best developers and product teams.
It's gonna be the same thing. There's like such exact parallels that I speak with such conviction because it's already over, companies have already done, they've already decided that they're going to do this and other functions. It works so much better than how the revenue team operates.
Why wouldn't you move a similar but adapted mindset and framework from your product team, into your business? You only have two things you got the product and go to market.
Those are the two things that differentiate and win-win for companies and you typically need both. There's culture and there are other things too. I'm simplifying here, but those are the two major things and you have all this stuff that's working to build your product effectively.
Why wouldn't you put some similar wrapping around it? Because most often, companies have a great product and they suck at go to market. It's rare when you have it the other way around.
46:17
I want to be respectful to Chris’s time because we could, because of the nature of this podcast is unlearning, right? and so we're gonna ask people a ton of questions and I'm sure some of our guests are gonna get very annoyed with us, but the creative community is going to learn, you know, Chris I want to get two minutes of your feedback on the Revenue R and D.
Just looking a little bit more just partnerships holistically because Kelly and I are on this journey together. So what are your thoughts and just Revenue R and D but a little bit more focused on the partnership side of the business?
47:05
When you look at partnerships, we consider that a program inside of the Revenue R and D framework, just like marketing your category through a podcast. Events in LinkedIn would be, so it would be tracked as a program, a key program inside of the revenue R and D Model, and then you would move it through the stages based on attributable results.
You're gonna have direct sales from partners, right? That's often the only way that it gets attributed. If you install self-reported attribution and you have partners that create demand that will show up in self-reported attribution. And so that could be another way to measure it.
And I think those are the clean-cut ways when I love installing self-reported attribution and doing it for companies because, within two weeks, you know what's working and what's not just based on what customers tell you.
So you get a lot of interesting insights where if you do have and if something is working, you know immediately. And so if partners are out there doing unconventional things that are creating a lot of demand. I find partners often partner to be a lot of demand catchers the company has and it's the same with the distribution of hardware and other partner models, the company has to go out and create the demand and then the partner just captures the demand for someone that already wants to buy.
Hey, we need HubSpot, we need, you know, someone to implement it, let's go to this company. And so if you have to decide what your partner network is most often I would call it capturing demand and therefore they should probably be scrutinized against how much demand gets captured.
But it's not like I look at it differently than the idea that like, oh like our partners captured 1.1 million and our sales team captured 1.9. Like I guess our sales teams are better. Like I don't look at it that way. They're all separate go-to-market motions that contribute to the overall strategy.
Yes, you should be investing appropriately in each one based on what you think are the best investments for your company and hopefully, you have some data to support it. But it's not a competition.
It's more like where do buyers go when they want to buy? Maybe you're seeing a pattern if you've been measuring this over time, maybe you're seeing a pattern where you're, your direct sales are going way up or vice versa, your partner channels going, going way up and outpacing your direct stuff and that type of insight on, on those trends would be useful to drive future strategy.
49:18
Cool. alright, Kelly, one last question for you and then I have one question for Chris and then, you know, I feel like most people cannot stand a podcast that's more than 18 minutes because there are just too many concepts, but this was so good. I just kind of let it go. You know, people just cut it up and like share it over a couple of weeks ago or so.
49:42
One last question is if someone's a CMO inside an organization and they're brought into what you're saying, what would you say would be the most effective argument to the rest of the C-suite in terms of turning this leaf?
49:56
I think that most CMOS will be resistant to this.
50:02
But what if they see the logic of what you're saying?
50:04
Let me I'll explain both sides but I like to proactively address people's concerns because I know what I can imagine what people are thinking. Most CMOS won't want to do this. What I'm saying is we're gonna take your big bucket of marketing and we're gonna break it up and we're gonna put you in the place where you do the best work and drive the best value to the business. Often for a CMO that falls into product strategy, customer insights, product marketing, and demand play second fiddle. And they don't know anything about ops.
And so we're sort of like breaking that up and putting distinct functional leaders in charge of that and creating visibility from the CEO to these functions at a level that's needed to drive the strategy forward.
And so it would involve having marketing get broken up between Revenue R and D which would be a functional leader at the same. It doesn't have to be a C-level title but it would be at the same, it would sit counterpart to the Chief Revenue Officer.
You'd have your most likely your CMO that would take over leading the product strategy and category strategy work and then you put the ops inside of rev ops and so that's the overall design and that's the rationale for why most CMOs wouldn't want to do it because they would feel like they're losing responsibility, not that they're making a choice that's going to make their organization far more effective.
But if a CMO wanted to go down this path, I think that sort of pulled out a couple of the key points that I've mentioned here. I think the biggest eye-opening one for me as an engineer and a scientist and understanding things very logically is that the way that we have marketing buckets today sets it up for failure.
Most CMOs don't stay for more than 18 months. The reason is that we have heavily competing for short-term and long-term priorities that deserve to be two separate things. And if that if we made that choice for a CMO, the CMO could do all of the big long-term customer-focused strategic work that they love to do that drive so much value to the business and not be required to hit a pipeline target this quarter, which gets in the way of all the important stuff and someone else has to own that piece.
And I think that when presented that way it makes a ton more sense. It's gonna create far better alignment between a Revenue R and D function and a revenue function than between a marketing function and a sales function in the way that it's set up today.
Many of our best, most successful customers, the CRO is leading the relationship, not the CMO here. When you think Revenue R and D and pairing with the sales leader, it's not like you're doing sales but your counterpart to the sales kind of like how the CMO is right now but is split in different ways.
And so thinking logically about that point is interesting and then I think that the organizations need to decide how they want to measure and evaluate the success of their go-to-market.
If they think the way that it's been done so far in this sort of demand capture sales focus type of thing. If they think that that's what's going to propel them to growth in the future then they should keep doing what they're doing. Salesforce and Oracle and big, you know companies that are further along, we'll keep doing that stuff but damn if you're 100 to 1000 employees and you're trying to break in break into a new category or create your category or go out and do something huge, you gotta think different.
Sometimes you gotta challenge what people have done. Sometimes you have to look at everyone else doing this and everyone in our VC portfolio is doing it. But is it right for us? What do our customers think? What are we gonna do to pave the different way?
I just challenge revenue professionals to think that way because it's become very homogeneous. People are trying to figure out how not to get fired, basically trying to figure out how to hedge with research from Gartner or other big firms that are respected, put it in a deck, and say we did our due diligence. What Gartner said to do was the right thing to do. So that's what we're gonna do.
I hope for people to be far more thoughtful and far more innovative and how they think about their revenue functions because it just makes it way more fun.
It's literally like I have so much fun doing this stuff, sharing my thoughts with you doing the podcast, meaning a bunch of people seeing positive things from customers every time instead of oh, I freaking hate your pdf on an e-book. I can't read it on my iPhone and some of those things that people do or why are you cold calling me three times?
I just downloaded one of your pieces of content and just the difference in how your customers respond when you do things that are in their best interest, which also drives good results for you versus things that directly compete with what your customers want. It's just way more fun.
54:16
Well thanks, Chris we just lost Gartner as a sponsor for this podcast. Just kidding, this is fantastic. I mean like I think it landed on what we were trying to do with this, this, this, this series of this episode, I guess before closing this thing out. We'd love to have you back whatever you think is the right time.
But are there other people that you know that you have a feel for? What we're trying to do with this podcast? Are there other people that you think we should bring on?
55:00
Yeah. so a lot of the foundational concepts between effectiveness and efficiency and autonomy and control and long-range versus short-range are concepts that were created by this guy, Lex Sisney. He runs a company called Organizational Physics and it's been very enlightening to me to understand the way that he thinks about his concepts I think that it would help a lot of other executives and the CEOs as well.
And he challenges a lot of the stuff we challenged, we sort of took it, took his foundation and took it a step further about what it means to the marketing function. But he challenges a lot of things that that even things dumb things that we did when we were 50 people that we look back on it like that didn't work and he's like here's exactly why it didn't work. It breaks the rules.
So I think that you should consider having him on. I think it'd be really helpful for executives to understand how the structure of the business in combination with the processes that you put in place, create a lot of leverage and how companies typically do a C-level five-person leadership team and then roll a bunch of competing functions inside of those C level leaders set C level leaders up to fail and doesn't put the company in the best position to win. I get that it's a different view and it's nontraditional but it's something that's that I've embraced and I think a lot of smart people would see it too.
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